Uncertainty Lingers

A lack of negative news was all we needed to tack on decent gains following yesterday's strong finish. Volume was light and a bit choppy but the bulls were hungry for action and managed to push things along nicely after the early morning bounce was sold.

While two days of decent gains are a nice change after last week's rough action, it doesn't do anything to change the big picture. We have been in a trading range with 1120-1125 of the S&P 500 as the floor since Aug. 8. Despite one low-volume, window-dressing run in late August, we have not been able to turn the trend back up.

My major concern is that if we test that support at 1120-1125 again, I do not think it will hold and we'll see another ugly leg down. Unfortunately, with the negative news flow out of Europe, we have a potential catalyst in place for that retest.

While I don't have a very bullish view longer term, I'm happy to knock out some countertrend trades on days like today. Some of the biggest and sharpest bounces come within downtrends and they can make for good trading. The challenge is that it isn't always easy to find the right vehicles. This poor market hasn't created a lot of good charts, and if you want to buy, you may have to take something that is less than ideal.

The European situation is a big unknown, and it can remain uncertain for quite some time. We can navigate through it by staying short term and reactionary, but we'll have to be especially vigilant.